Tax Agreement Paves Way for Endgame Spending Deals

Republicans are close to finalizing their signature package of tax cuts, and would then move on to other must-pass bills.

President Trump, flanked by Rep. Kevin Brady (left) and Sen. Orrin Hatch, speaks during a bicameral meeting with lawmakers working on the tax cuts Wednesday.
AP Photo/Manuel Balce Ceneta
Dec. 13, 2017, 8 p.m.

Broad proposals for the final version of the $1.4 trillion tax-overhaul bill are not hitting snags on either side of the Capitol, pushing the measure toward a vote next week and setting the stage for other key year-end legislative priorities to fall into place for the GOP.

Time is running short, however, and with only a week left before the scheduled Christmas recess, Congress must reauthorize the Foreign Intelligence Surveillance Act and an already-lapsed children’s health measure, as well as pass a supplemental disaster-relief package and a government-wide spending bill to avoid a shutdown.

House and Senate Republicans have been holding off on those must-pass items until their tax bill passes, for fear of tying up President Trump’s signature legislative accomplishment in negotiations over a spending package or letting other unrelated items become bargaining chips.

In a private meeting of House Republicans on Wednesday, the conference decided to follow the House Freedom Caucus’s playbook and pass a full-year defense spending bill with a short-term continuing resolution for domestic spending early next week. Majority Leader Kevin McCarthy said he thinks it will be difficult for the Senate to turn that down.

But other Republicans said it is a foregone conclusion that the Senate will not pass it because Democrats insist on dollar-for-dollar increases to domestic spending if Republicans boost defense, and the measure would need 60 votes in the upper chamber.

“Some people are suggesting we could jam the Senate—we could pass it on Wednesday and send to over to them and go home. But if you do that, you’d better get a return flight on Thursday,” Rep. Mike Simpson said. “You really think that Senator Schumer is going to go along with just doing the defense appropriation … and a CR on the rest of them? That’s not going to pass.”

Meanwhile, House Energy and Commerce Committee Chairman Greg Walden said he is advocating a long-term renewal of funding for the Children’s Health Insurance Program and the community health centers as part of the spending deal. The House passed such a bill in November, largely along party lines because of controversial pay-fors, but leaders have not yet decided how to handle the issue in the year-end logjam.

“At some point [Democrats are] probably going to get tired of being told to vote against five-year funding for CHIP,” said Walden.

Similarly, House Judiciary Chairman Bob Goodlatte wants to push his committee-passed FISA extension, but civil-libertarian-minded members are wary, and even those in the middle believe adding it to a year-end spending bill would be a problem.

“FISA will sink it. There’s too much disagreement,” House Freedom Caucus Chairman Mark Meadows said. “Most of us have a problem with a query being allowed on United States citizens without a warrant. You need to fix this.”

Finally, the House must deal with a supplemental spending measure delivering aid to areas struck by Hurricanes Harvey, Irma, and Maria. Complicating that matter are members from Florida who want to see more aid for citrus growers who were hit hard by Irma.

“My district is all the orange juice that you drink, and if I go home and don’t have a solution to that problem, then I am in deep, deep trouble with my district,” Rep. Tom Rooney said.

Tax reform, at least, seems close to wrapped up. Lawmakers say they’re discussing last-minute tweaks to the tax bill’s final version, paid for in part by a 1 percent increase to the target corporate tax rate, from 20 percent to 21 percent, starting in 2018. Lawmakers are also discussing lowering the top individual rate to 37 percent. The House bill had a rate of 39.6 percent for earners above $1 million, while the Senate rate for the same bracket was 38.5 percent.

The conference committee held its only public meeting Wednesday, though it was largely pro forma. House Ways and Means Committee Chairman Kevin Brady said a committee report, the final version of the tax bill, would be filed at the end of the week.

President Trump had insisted that the corporate rate not rise above 20 percent, but said Wednesday that he would “be thrilled” with a 21 percent rate. The corporate-rate change would raise about $100 billion over a decade, and the other changes may cost more than that amount, so the final version of the bill could have additional revenue-raising provisions.

Many House Republicans seemed comfortable with the changes as of Wednesday evening.

The challenge is largely in the Senate, where leadership must lock down the same holdout votes that posed a challenge when the chamber passed its version early Dec. 1 on a 51-49 vote. Two key senators, Maine’s Susan Collins and Wisconsin’s Ron Johnson, appeared upbeat about their tax issues Wednesday, though neither gave an affirmative “yes” on the bill just yet.

As the Senate squared away its version in late November, Johnson held out to increase the income deduction for pass-through entities—companies that pass their profits to the owner for tax purposes—from 17.4 percent to 23 percent. That number is likely now to be about 20 percent, a move Johnson says is acceptable if combined with the cut in the top individual rate.

“I have no problem with a 37 [percent], 20 percent revision; that would be fine,” Johnson said.

Collins has said she doesn’t believe the top individual rate should be lowered.

In the run-up to the vote on the Senate version, Collins also secured an agreement to advance two health care-related bills meant to reduce the impact of any premium increase stemming from eliminating the Affordable Care Act’s individual mandate, another likely component of the final tax bill. Collins said that after meeting with Vice President Mike Pence on Tuesday, she was confident her deal would be honored by the end of the month, though she didn’t specify which legislative vehicle it may ride on.

“I had a very good discussion with the vice president yesterday about that issue, and I feel certain that the agreement that I negotiated will be kept, this year, by the end of the month,” Collins said.

Even Meadows indicated that although he and the Freedom Caucus do not want those measures passed, he thinks they ultimately will be.

“She has every reason to believe that it will be included. I’m not supportive of that position, but I don’t know that she is misled in her confidence,” he said.

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